XBOX and the battle for the living room…

Changes…changes…changes….was looking at my stack of XBOX360 games and thinking about the conversations 8+ years ago about ‘the battle for the living room’ that PCs were going to face. “How could the PC ever get in beyond the hardcore hobbyists?” Recall the conversations of how futile it would be for Microsoft to even try to get a Windows machine into the sacred living room. I now have 2 xbox 360’s, 10+ titles purchased at $60 each, a number of online transactions for movies or the yearly XBOX live accounts renewed for the third time recently (approx $600+$600+$150+$50 > $1400). They consume a significant portion of my entertainment dollars as well as my time for relaxation in every form: alone and with friends in both meatspace and cyberspace. When we have parties, some portion of the guests end up on the xbox for some portion of time, typically playing guitar hero style or trivia style games. While it may not have reached its full financial payoff yet for shareholders, I think this XBOX thing has been a monumental success, 25 million units in living rooms throughout the world and growing. A more interesting analysis would put together the amount of money made per title, avg. # titles purchased per year in each geography as well as online content amortized over the 5-10 year life cycle of the console and get a number that I think more than justifies their decision to enter this ecosystem. Way to go Microsoft. Might be good lesson for other large companies to learn from when entering entirely new ecosystems, seems their persistence and bringing in the right talent allowed this battle to be won. I appreciate, as both an investor and consumer, Microsoft’s permission to let the inmates run the asylum. In many cases, this would have been a catastrophy, but in this case created a more interesting world for us all.

I’ve heard people say ‘the wii has won’, as if that was a competitor. Sure, people split their dollars between these devices, but ultimately they also compliment and reinforce the acceptance of similar play metaphors for the living room. Similarly with the playstation’s of the world, they will compete for the split of consumer’s wallets but validate the battle because they all can be successful in this space. In this round, Sony seems to not have gotten the numbers MS did, but this will reinforce their vigor to get it right the next time around. In the end, humanity benefits in this competition, despite the Orwellian oligopoly this ecosystem has become.